Macau has become the world's biggest gambling centre
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Macau, the special administrative region of China and undisputed champion of the global gambling industry, is going through a period of unprecedented growth.

In the process, it is attracting the biggest players not only in the world of gambling, but also in watches and jewellery.

Given a Chinese population eager to place bets, and a gambling revenue of $45bn in 2013 – an increase of nearly 20 per cent on the previous year – it is easy to see why. And Macau’s gamblers have an appetite for luxury goods.

“Our customers come to Macau to indulge themselves,” says Jean-Marc Pontroué, chief executive of Roger Dubuis, a Geneva watchmaking company. Macau is his brand’s premier market and in the past two years the company has opened three boutiques there.

Its smallest branch – in Wynn Macau, a luxury resort – is also its best-performing. “In a very small area you have the best of what Geneva can offer,” says Mr Pontroué.

“We offer a lot of complications and differentiated aesthetic products, which appeal to this clientele,” he adds. “Customers who can afford this type of complication know Dubuis. They expect to come to Macau to see and buy what they are already aware of.”

Mr Pontroué points to a growing demand for niche brands: “It’s not for every brand, but for our type of positioning – niche and with strong credibility in the high end – this is one of the cities where we are going to pay a lot of attention to opening further stores.”

As the boom reverberates across the Pearl River Delta, the Chinese government is responding quickly. A bridge from Macau to nearby Hong Kong is being built to alleviate pressure on the fleet of ferries that in 2013 brought a significant proportion of 17m Chinese tourists to the region.

Peter de Kantzow, an Australian entrepreneur, plans to launch a fleet of seaplanes to escort high rollers to Macau from China’s Shenzhen airport as early as next year.

Guillain Maspetiol, managing director for north Asia at Jaeger-LeCoultre, says: “The only constraint [for retail space] may be to find a good location, since many luxury brands are already open everywhere.”

For shoppers seeking fine jewellery and rare stones, casino owners will often tap into their relationships with auction houses, according to insiders.

“We have good contacts with the casinos for those who want to buy the very best items,” says Vickie Sek, director of Christie’s Asia jewellery and jadeite department.

Arnaud Bastien, president and chief executive, Asia, at Graff Diamonds, which has a boutique at Wynn Macau, believes limitless gambling opportunities ensure strong business potential that can only be helped by the brand’s visibility on the mainland.

“We work hard to ensure a balance between a domestic presence and overseas sales in duty-free markets such as Macau and Hong Kong,” he says. “We are keen to ensure we continuously capture this tourist market.”

China’s recent economic slowdown appears so far to have had little impact in Macau. But the risk for luxury brands lies not only in policy changes and any potential repeat of China’s 2008 restrictions on the number of mainland visitors, but also in the territory’s limited growth in hotel rooms, a result of infrastructure delays and building labour shortages.

“Luxury watch companies cannot ignore Macau. However, we doubt it will ever become a meaningful watch market,” says Thomas Chauvet, a senior equity analyst at Citigroup.

He adds: “With gambling, not shopping, the primary occupation of mass-market Chinese tourists in Macau, Hong Kong offers more steady growth opportunities.”

Moves to rely less on high rollers, combined with the Rmb20,000 ($3,300) restriction that a “premium mass-market” tourist, who has no access to casino-linked credit lines, can take out of the region, have resulted in the number of pawnshops more than tripling in the past 10 years to about 170, according to Chou Chin-Leong, president of the Macau General Chamber of Pawnbrokers. Rolex, IWC and Cartier watches are traded like baseball cards in the these shops.

But there are still enough VIP high rollers in Macau to generate healthy business for brands such as Girard-Perregaux.

“These customers are regulars, and concierges serve them as would their financial advisers,” says Michele Sofisti, chief executive, adding that it is not unusual for a private viewing to be organised in a hotel suite.

Then there’s the ego factor. High rollers tend to spend generously to “show off”.

Their friends will also then buy so as not to lose face, says Mr Sofisti, who sold 15 Girard-Perregaux timepieces in the first three weeks after opening his Four Seasons boutique last September.

As Wilhelm Schmid, chief executive of A. Lange & Söhne, puts it: “Macau is good for business, not brand building.”

This story has been amended since original publication to reflect the fact that Gabriel Chan no longer works for Credit Suisse.

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